Snowflakeit is (NYSE: SNOW) margin expansion and impressive revenue retention make it a stock to watch. In this clip from “IPO & SPAC Show” on Motley Fool Live, recorded on April 11Motley Fool contributor Danny Vena discusses Snowflake’s performance and financials, as well as what sets the data warehousing company apart from its competitors.

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Danny Vena: Now Snowflake, just leave the slide here, what Snowflake does is they are a data warehouse. One of the things they do is they allow enterprise customers to pull data from old enterprise systems, pull it into one place where they can then use that data to gain insights. Similar to what Palantize (NYSE: PLTR) done, but there is also more than one storage capacity. Now, what sets Snowflake apart from some other companies is that it’s not technically a software-as-a-service company. SaaS companies, we know that these companies use this software as a service. What is different about Snowflake is the fact that it is a usage-based company. Customers pay as they go for the time and data they use. I think one of the biggest things working in Snowflake’s favor is that digital transformation is happening and we’re creating new data at a remarkable rate. The ability to not only store that data, to warehouse that data, but also to derive meaningful insights from that data is important. The software doubled on its first day of trading. The first investors were Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) and Selling power (NYSE: CRM). More recently, and this is key here is a year after their IPO, revenue doubled again year-over-year in the last quarter and the company’s margins are growing. Now you’re looking at the remaining performance obligation, an important metric that Jason talked about earlier, which is revenue that’s contractually obligated but hasn’t yet been recognized in revenue. This has also doubled, which means that over the next year they will recognize this in revenue, which bodes well for future growth. The company also just said the most recent quarter was its biggest bookings quarter yet. They continue to grow the number of customers and their most valuable customers are growing at three times the rate, almost four times the growth rate of their regular customer base. Revenue retention is remarkable, customers spent 78% more this year than last. Their free cash flow has increased 10 times. It’s a business that I find quite fascinating overall. It was able to sustain the level of growth they had when they went IPO, which you haven’t seen much from other companies.

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Danny Vena owns Palantir Technologies Inc. and Snowflake Inc. The Motley Fool owns and recommends Berkshire Hathaway (B shares), Palantir Technologies Inc., and Snowflake Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short $200 put options in January 2023 on Berkshire Hathaway (B shares) and short $265 calls in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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